The baht is expected to remain firm to the US dollar for the remainder of this year as offshore funds continue flowing into long-term Thai bonds, even though the Bank of Thailand recently imposed measures to curb the inflows, says a Kasikornbank (KBank) senior executive.
The central bank's measure to narrow the cap on the outstanding balance of non-resident accounts from 300 million baht per person to 200 million has lowered foreigners' net buying in Thai short-dated notes to 80 billion baht year-to-date from 120 billion before the measure was announced a few weeks ago, said Kobsidthi Silpachai, head of capital markets research at KBank. The bank predicts upward movement for the baht in the second half based on global and local economic circumstances.
The measure took effect on July 22. The central bank has also tightened the reporting requirements for non-residents holding debt securities issued in Thailand. All non-residents' holding Thai debt securities must report their names from this month.
The baht is expected to briefly hover around 31 versus the greenback next week from 30.9 before reversing course, he said.
The bank is maintaining its baht's forecast unchanged at 31 to the dollar for the year-end amid global economic uncertainties.
The trade war between the US and China, a potential policy rate cut by the US Federal Reserve and the perception of the baht as a safe haven are key factors strengthening the baht.
"Faster economic momentum in the second half after the new government formation should build up investor confidence and support economic growth. This would further attract offshore capital inflows," said Mr Kobsidthi.
The baht is the top performing currency in Asia, gaining around 5% year-to-date. The local currency's strength was apparent last month when an influx of capital pushed the baht to a six-year high after the US central bank signalled monetary policy easing to boost growth.
The bank forecasts the country's economic growth at 3.1% for this year, 3.4% for the second quarter. KBank is keeping its growth estimate for exports flat this year amid the US-Sino trade spat, Mr Kobsidthi said.
Pornpen Sodsrichai, director of the economic and policy department at the Bank of Thailand, said the central bank has prepared several measures to rein in the baht amid a spate of global uncertainties.
"There is more room for encouraging outbound portfolio investment. However, the market situation needs to be monitored and the baht's movement evaluated as to whether additional measures are needed," she said.
The central bank prefers foreign direct investment to hot-money inflows as the former facilitates economic growth and improves the country's productivity for sustainable growth, Ms Pornpen said.
Apart from the latest measures, the central bank tapered 60 billion baht out of its July issuance of three-, six- and 12-month bonds in a move aimed at curbing hot money and the baht's rapid gain.
